The Woodside Energy Group Ltd (ASX: WDS) share price has had a ripper year, lifting 37% over the last 12 months.
Much of its gains have come on the back of surging oil prices. The black liquid's rocketing value saw the energy producer posting whopping earnings last year.
But with oil prices now trading closer to 'normal' levels, does the Woodside share price still represent value?
Experts at Allan Gray think so. Here's why they see even more upside for the S&P/ASX 200 Index (ASX: XJO) oil giant's stock in 2023.
Woodside shares still offer plenty of upside: fundie
The Woodside share price has leapt higher in recent months to trade at $35.565 today, and there could be more gains to come, according to Allan Gray analyst and portfolio manager Dr Suhas Nayak.
He's still bullish on the company which makes up 8% of the Allan Gray Australia Equity Fund, despite the fund trimming its position following last quarter's gains.
Of the company's top spot in the fund, Nayak said, "we're always looking at the upside and the downside, or the payoff profile, of all these stocks", and ASX 200 energy producers still have plenty of payoff potential. He continued:
We still see value in … Woodside in particular.
You're buying these companies … at prices that assume a sub-US$70 oil price, and we're at around US$85.
So, for every year that you see this US$85 oil price, that's a significant level of earnings Woodside and Santos Ltd (ASX: STO) get to have, and shareholders get to benefit from.
Those earnings are said to be capable of sitting at around 5% of Woodside's market capitalisation annually if the oil price stays at around US$85 a barrel – or higher. A likely happening after "years of underinvestment in the energy sector", Nayak says.
The expert isn't alone in his bullish view of the energy commodity. RBC Capital Markets LLC analyst Michael Tran thinks we may have already seen the lowest oil price of 2023, my Fool colleague Bernd reports.